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Oct CU balance sheets earnings continued to improve

MADISON, Wis. (12/4/12)--Credit union balance sheets and earnings improved in October, continuing a trend that has been in place during the past 10 months, according to a Credit Union National Association (CUNA) economist's analysis of October's monthly sample of credit unions.

"The capital-to-asset ratio reached 10.5% in October, up from 10.2% at the beginning of the year," Steve Rick, CUNA senior economist, told News Now. "The continued rise in the capital-to-asset ratio was due to better earnings. Credit union earnings as a percentage of average assets year-to-date are running at 76 basis points, up from 68 basis points for all of 2011. Earnings rose mainly due to falling loan-loss provisions. Provisions fell, in turn, because of falling loan charge-offs and loan delinquency ratios.

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"Since the beginning of 2012, delinquent loans as a percent of total loans fell--from 1.6% to 1.1% today," Rick added. "This 32% drop in the delinquency ratio was because of the simultaneous drop in the dollar amount of delinquent loans by 28% and the rise in total loans by 4%. CUNA is forecasting credit union earnings to come in at 70 basis points in 2013."

The total dollar amount of capital is $108 billion.

Credit union loans outstanding grew 0.4% in October, up from 0.3% growth in September. They totaled $608 billion in October, compared with $583.9 billion in October 2011. Adjustable-rate mortgages led loan growth with a 2.2% increase, followed by new-auto loans, which grew at 1.1%, and used-auto loans, which grew at 0.8%. Unsecured personal loans increased 0.7%, and credit card loans rose 0.2%, while fixed-rate mortgages fell 0.4%, and home equity loans declined 2.6%.

"Loan growth has accelerated in 2012 relative to 2011," Rick said. "Loan balances should rise 4% in 2012, significantly better than the 1.1% growth last year. In October, loan balances grew 0.4%, better than last year's pace of 0.3%, due to rising consumer confidence levels. CUNA is forecasting slightly better loan growth in 2013 of around 5%.

"The big news on the lending side is the return of new-auto loans," Rick added. "New-auto-loan balances grew 1.1% in October, compared to no growth last October, and grew 7.4% since the beginning of the year. This comes on the heels of falling new-auto loan balances over the last few years due to the great recession and the weak recovery."